Uber has been ordered to pay $81m in payroll tax to Australia’s New South Wales government after the country’s High Court ruled that payments made to its drivers qualify as wages.
The High Court, in a majority decision delivered on Wednesday, dismissed the ridesharing company’s appeal against six payroll tax assessments covering the 2015 to 2020 financial years.
According to ABC News, the court held that Uber’s drivers operated under contracts with the company and that fares paid to them constituted wages under the state’s payroll tax legislation.
Uber had challenged the assessments, arguing that it merely acted as a payment collection agent, transferring fares to drivers after deducting service fees.
The company maintained that its arrangements with drivers were administrative and should not attract payroll tax.
However, the court rejected the argument, finding a direct connection between the services provided by drivers and the payments they received.
Chief Justice Stephen Gageler said the relationship between drivers’ work and the payments made to them meant the fares qualified as wages under the relevant tax laws.
In a joint judgment, Justices Michelle Gordon, James Edelman, Jacqueline Gleeson, Jayne Jagot and Robert Beech-Jones said the contractor provisions were designed to “catch schemes designed to avoid liability for payroll tax”.
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They upheld the lower court’s position that Uber’s business model depended on collecting payments from passengers for each trip and retaining a service fee, while drivers provided the services that enabled the company to generate revenue.
“Drivers clearly ‘supply’ a service to Uber by doing something that is necessary for Uber to derive service fees and to continue its business,” the joint judgment said.
The justices added that payments transferred to drivers were made in connection with the performance of driving services under relevant contracts and were therefore deemed to be wages.
Justice Simon Steward was the only member of the court who dissented from the majority decision.
The ruling could also influence how other Australian states interpret tax provisions designed to prevent businesses from avoiding payroll tax through contractor arrangements.
Reacting to the judgment, Uber said it respected the court’s decision but maintained that digital marketplaces should not be required to pay payroll tax.
The company warned that the decision could have wider implications for businesses operating through intermediary platforms.
“This decision could have significant unintended consequences beyond rideshare, affecting intermediary business models across the economy, including mortgage brokers, service-based marketplaces, medical practices and other healthcare services,” Uber said.
It described the ruling as an alarming precedent, arguing that businesses in Australia were already facing increasing regulatory and cost pressures.
Uber urged state governments to modernise payroll tax laws to reflect the operations of digital platforms and provide businesses with greater certainty.
However, the Transport Workers’ Union welcomed the judgment, describing it as a “critical reality check to companies seeking to skirt our laws”.
The union’s National Secretary, Michael Kaine, said companies could not escape their tax obligations simply because their workers were not classified as employees.
He accused Uber of structuring its business model to distance itself from legal obligations while benefiting from the services provided by drivers.
New South Wales Finance Minister, Courtney Houssos, also welcomed the ruling, describing it as an important decision for the state’s revenue system.
She said payroll tax remained a key source of government revenue used to fund essential public services.
“Local businesses pay their fair share. Uber should pay their fair share too,” she said.
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